Here's Why The Employment Situation Is Now Way Stronger Than Anyone Realizes

Something Amazing is Happening With the Payroll
Figures. The February non-farm payroll showed a further
loss of 36,000 jobs, versus an expected loss of 75,000, and the
unemployment rate remained unchanged at 9.7%. December was
revised up by 41,000 and January was revised down by 6,000, so
netting everything out there was essentially no change. Those
hired now exactly equal those fired, about 3 million a month.

There were continued big losses in construction, and decent gains
in temps. This month I decided to take advantage of former Labor
Secretary Robert Reich's course on labor statistics which I took
at UC Berkeley, and dig through the supporting data at the Bureau
of Labor Statistics website (click here for the link). Something
amazing is happening.

There is a barbell effect in the labor markets which no one seems
to see, which is rendering the aggregate payroll figures
meaningless. There is a barbell effect taking place, where the
40% who have been jobless for more than six months, who worked in
the bubble industries of real estate, housing, and
construction, are never going to see their jobs come back.

The 60% who are short term unemployed, who recently lost jobs in
finance, accounting, and health care, are getting rehired very
quickly. In fact, 20% of the jobless are getting rehired in only
six weeks. There is another effect at work. While the employment
rate for those with no high school diploma is 16%, the kind of
worker who lost their manufacturing jobs to China, the jobless
rate for those with college degrees is only 4.5%. This is proof
that the dying sectors of the US economy is delivering the
highest unemployment rates, and that America is clawing its way
up the value chain in the global race for economic supremacy. It
is what America does best, creative destruction with a
turbocharger. There is a third influence here, which could be
huge. The BLS only contacts existing businesses for its survey.

It doesn't survey companies operating out of someone's garage in
startup mode. Given the huge ongoing dislocations in our
industrial structure and the incredible advances in software, the
Internet, and cloud computing, this could be one of the biggest
job creators of all. So far, it is not being counted at all. The
bottom line is that payroll figures are much better than they
appear at first glance. Red Alert! The markets don't know this.